The ruling is also a blow to David Bergstein as the appeals court affirms they were partners in five bankrupt companies.

Beleaguered movie investors David Bergstein and Ronald Tutor suffered another legal setback as the federal appeals court in the central district of California rejected their plea to reverse an injunction that stops the sale of movies that were part of ThinkFilm and four other now bankrupt companies.

The ruling on May 20 by U.S. District Court Judge Philip Gutierrez found that the sale of Born Into Brothels, Half Nelson, Before The Devil Knows You’re Dead, Murderball, the Aristocrats, the Boondock Saints and other films would do more harm to creditors in the bankruptcy case than it would to Tutor’s wholly owned holding company Library Asset Acquisition Corporation (LAAC).

“Even if (LAAC) could prove that the (film library) will diminish in value,” wrote Gutierrez, “it does not appear that any decreased value would, on balance, be more prejudicial than completely removing the (creditor’s) right to recover.”

The ruling was a vindication of efforts by court-appointed trustee Ronald Durkin and David Molner, who represents Aramid Entertainment Fund and controls Screen Capital International (SCI). The pair sought to prove that the movies were fraudulently transferred from the bankrupt companies to LAAC, in order to keep them out of the hands of legitimate creditors.

The trustee and Molner’s SCI say that Tutor, with the assistance of Bergstein, “accomplished the transfer by backdating documents” says the court’s ruling, so that the library would be “insulated from the creditors who had recently obtained judgments.”

In some of the transfers of movies, Bergstein acted on behalf of both the buyers and sellers, which the appeals court said was further evidence that this was not an independent transaction.

The ruling also finds that Tutor is indeed an “insider” in a legal sense in the bankrupt companies, as the trustee and SCI have long contended and he has denied. That could have future consequences on Tutor’s multi-million dollar clams against the bankrupt companies.

“Tutor was the sole owner of LAAC and also controlled the (bankrupt companies),” says the ruling, which establishes that he had a “special relationship” with those companies.

The appeal court judge also agreed with bankruptcy court Judge Barry Russell that it is likely SCI will be ultimately successful in the case to prove fraudulent transfer, and agreed there may be “conclusive evidence of actual intent to defraud.”

Gutierrez also found that although Aramid signed a release in regard to money it was owed by ThinkFilm, it can still pursue claims against the bankrupt companies because it is now acting “in a derivative capacity” on behalf of all the other creditors.

Russell recently granted a motion that allows Aramid and SCI to act on behalf of the trustee to seek to recover money and assets that are part of the bankruptcy but have been moved elsewhere by Bergstein and Tutor. On May 20, Bergstein filed an appeal to the federal district court seeking to have that order overturned.

Separately, Tutor on Feb. 14 paid about $160,000 in attorney fees and costs to Aramid, SCI and their attorneys at two law firms as a result of losing civil cases under a SLAPP motion.

Tutor in May 2012 had sued Stroock and Stroock and Levene Neale Bender Yoo & Brill LLP for allegedly using confidential information provided by Bergstein’s former lawyer Susan Tregub to aid Molner in his fight against Bergstein. His payment indicates he is ending that string of litigation.

Tregub lost a judgment in L.A. Superior Court to Bergstein in a related case, after which Bergstein and then Tutor sued the lawyers who sued them in the federal case. Both of their cases have been thrown out but Bergstein continues to appeal. If Bergstein eventually loses his appeal, he could be liable for similar lawyer costs and fees of at least $250,000.

There was no response to a request for comment from Bergstein, his attorney and an attorney representing Tutor.